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TPC Consolidated Ltd
ASX:TPC
Investor Presentation November 2016
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Investor Presentation
SECTION 1 Introduction
SECTION 2 FY16 Financial Results
SECTION 3 Growth and Outlook
Appendix Overview of the Australian Energy Market
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INTRODUCTION
Section 1
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Section 1: Introduction
Corporate Snapshot
Details Values
Ordinary Shares on Issue 10.59m
Share Price1 $0.90
Market Cap $9.5m
Total Borrowings -
Cash and Cash
Equivalents (net of debt)2
$2.0m
Enterprise Value $7.5m
Notes: 1. Share price as at 18 November 2016
2. Includes cash and cash equivalents, and bank deposits securing bank guarantee, less invoice finance facility as at 30 June 2016
3
First to offer 24/7/365 customer service centre
Differentiate by strong customer relation service, easy-to-do business attitude
Employ direct-sales channels, rather than outsourced sale channels, yields higher quality customers,
improved margins and deters churn
Strong capability to support non-English speaking customers from Asia
Monthly billing model improves company cash flow
Cost advantage by taking benefit of lower expense offshore resources in Philippines and China for back
office operations
Strong alignment between Directors and shareholders with Directors having a material investment in the
business
51%
49%
Shareholding Structure
Other Shareholders Directors
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Section 1: Introduction
Investment Highlights
Addressable market size for SME is >$9bn
Consisting of around 1m SME customers
Higher usage per customer
Industry leading energy specific CRM
Long established cost effective Philippines and China operation centres
Lean senior executive management team
Senior management team proven history of performance
Supported by strong technical expertise
Experience in competitive business environment
Energy revenue increased by 174% in the last financial year
Customer base exceeds 12,000
Growing at a double digit rate
Embedded networks
Mobiles and Insurance for existing customers
M&A to expand
New markets (Australia and overseas)
Large & attractive
target market
Low cost
business model
Proven team with
track record
Strong results
Growth opportunities
4
TPC is undervalued on all metrics when compared to Australian peer comparable
companies
One of only 6 retailers providing both electricity and gas in NSW and Victoria
Significantly
undervalued when
compared to peers
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Section 1: Introduction
The CovaU Business
The CovaU business is rapidly expanding in customer number and top-line
performance, driven by a clear strategy for growth and effective pricing
A wholly-owned subsidiary of
TPC Consolidated Ltd
with a market cap of $6.4m
Grown the customer numbers
to 12,000 in 24 months,
reinforced by a strong
customer service ethos and
24/7 support
Initially launched in NSW in
April 2014, and expanded
into Victoria in March 2015
The business is an energy
retailer with a focus on the
SME and residential markets
Growing cash flows and
strong financial management
Direct sales channels
facilitates acquisition of high
quality customers, healthy
margins and low levels of
churn
CovaU business generated
FY16 revenue of $41.7m
(increased from $15.2m in
FY15)
Licences held for both
electricity and gas.
Can operate in
NSW, VIC, QLD and SA
Headquartered in
Sydney, Australia
12,000 24
$
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Section 1: Introduction
CovaU History
The CovaU business has experienced significant levels of growth since inception,
expanding on the back of a growing customer base and wider geographical presence
April
Acquired the NSW
electricity and gas
licences and acquired
first customers
March
Acquired the
Victorian
electricity and
gas licences
June
Reached
5,000
customers
December
Reached
$1m in
revenue
January
Investment in and exclusive
supply to embedded
electricity networks through
Long Tail Property
6
Continue to grow
the customer base
and geographical
presence via
organic methods
and M&A
April
Offshore call
centres in
Philippines and
China servicing
CovaU customers
since launch
February
Reached
10,000
customers
April
Launched
business
insurance
offering
May
Exceeded
annualised
revenue of
$50m
Future 2015 2014 2016
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CRM and billing system
(Orion) is a proven
energy specific platform
Section 1: Introduction
IT Systems
CovaU implements a variety of leading IT systems and solutions to:
• streamline operations,
• facilitate the interaction of teams and databases, and
• deliver efficient and comprehensive customer service
Online sales signup
system integrated into
Orion
Web-based customer
sign-up capabilities
100% customers calls
recorded
Leading customer call
queue management
Risk management
system is also a proven
energy specific platform
Sales have remote on-
the-road sign-up
capability
Proprietary tools
available online
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Section 1: Introduction
Customer Lifecycle
CovaU has a well
defined process to
onboard customers and
work with them closely
through their lifecycle,
ensuring their energy
needs and service
expectations are fully
met
Customer
acquisition
Metering &
data processing
Market
interaction
Customer
management
Credit &
collections
Billing &
exceptions
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Section 1: Introduction
Senior Management Team
TPC has assembled a
team of highly-skilled
and experienced
personnel, supported by
contracted energy
service providers and
consultants, with
support from
operational and
management personnel
with relevant industry
expertise
Charles Huang
Chief Executive Officer Charles founded TPC Consolidated Ltd [ASX: TPC] (“TPC”) in 1996 as an ISP whilst in the third year of
his Bachelor of Mechanical Engineering degree at the University of Sydney. Following the deregulation
of the telecommunications industry, Charles sought the opportunity to resell voice products in Australia
and in 1999, he decided to transform the company from a technology-oriented ISP to a marketing and
innovation-oriented business in the IDD and prepaid calling card sector.
He has successfully steered TPC from a start-up company to a public company which was listed on the
Australian Securities Exchange in 2007.
Steven Goodarzi
Chief Strategy Officer Steven has extensive management and operational experience internationally in strategy, business
development, sales and marketing across the telecommunications and IT industries. He has been
instrumental in leading the successful strategy and development of low-latency trading in the major
financial markets across Asia, North America and Europe.
Most recently, Steven was based in Tokyo with KVH, a Fidelity Investment company, as Director of
Strategy and Business Development. As Chief Strategy Officer, Steven’s vision and leadership is the
driver behind the forming of CovaU.
Jeffrey Ma
Chief Financial Officer Jeffrey has more than 15 years of financial services experience and is a Fellow of the Institute of
Chartered Accountants in England and Wales. He is also a Fellow of the Institute of Chartered
Accountants in Australia and a Fellow of the Financial Services Institute of Australia. He has over 11
years of financial services experience gained with Credit Lyonnais Australia Limited, where he held the
position of Company Secretary and Head of Finance and Administration for five years and was a
member of the management committee. Jeffrey also worked for two years in Westfield Holdings Limited,
a listed property management and development company. He has an extensive professional
background, having also worked for Coopers and Lybrand in Hong Kong and with a chartered
accounting firm in London.
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Section 1: Introduction
Organisational Structure
TPC has a clearly defined organisational structure with an experienced Board and
management team, supported by a driven and experienced team
Board
CEO
Chief Financial Officer Head of Sales Head of
Administration Head of IT
Head of Consumer
Business Chief Strategy Officer
Technology
Mobile
Human Resources
& Admin
Billing
Product NSW
Product VIC
Wholesale
Compliance &
Regulatory
Financial Controller
Accounting
NSW Energy Sales
VIC Energy Sales
Retention
Marketing
Philippines
Business Centre
China
Customer Centre
Australian
Customer Centre
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Mobile Sales
Insurance Sales
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Key benefits
Customer
acquisition
process
Section 1: Introduction
Customer Strategy
CovaU offers competitive rates for the delivery of electricity and gas to households
and businesses in Australia
Low rates
means more
savings
Looking after
YOUR
energy
needs
Simple
monthly
instalments
True
service
Residential
Philippines
Sales Team
SMEs
Direct Sales
Team
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Section 1: Introduction
CovaU Highlights
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• All about growth in deregulated market
• Grown customer numbers 0 >12,000 in
~24 months
• Strong revenue engine ($60 million annual
run-rate)
• FY17 target EBITDA: $2 – 3 million
• Opportunity for inorganic growth
‒ M&A
‒ Strategic investments
‒ Long Tail Property (Whole of building
energy supplier)
‒ New technology (Renewables)
CovaU has seen strong acquisition of customers growing to over 12,000 customers in
24 months and is expected to be generating revenue of at least $60m in FY17
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Section 1: Introduction
CovaU Highlights
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• The only Tier 2 retailer with dual licences to
sell electricity and gas
• In key markets of NSW & VIC
• NSW is one of the highest electricity
consuming markets
• Electricity growth gaining momentum
CovaU is seeing strong growth in customers and consumption in its key markets of
NSW and VIC
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Section 1: Introduction
CovaU Highlights
14
• The only Tier 2 retailer licensed to sell
electricity and gas
• In key markets of NSW & VIC
• VIC is one of the highest gas consuming
markets
• Gas growth gaining momentum
• Gas margins are attractive
CovaU is seeing strong cross-sell of its gas products and is one of only six retailers
licensed to sell both electricity and gas in NSW and VIC
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FY16 FINANCIAL RESULTS
Section 2
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Section 2: FY16 Financial Results
Financial Highlights
TPC’s core energy
retailing business has
experienced strong
growth throughout
FY16, driven by a larger
customer base and
streamlined operations
A$’000 Year end June 2016 Year end June 2015 Increase (%)
Sales of Energy 41,704 15,228 173.9%
Telecommunication Services 5,939 9,340 (36.4%)
Revenue 47,643 24,568 93.9%
Gross Profit 7,650 5,056 51.3%
EBITDA (2,986) (4,558) 34.5%
NPAT (2,540) (4,731) 46.3%
Key highlights
• Drivers of top-line performance include increase in energy revenue as the provision of electricity
and gas services further expanded into Victoria in March 2015
• Customer growth comes from a clearer and more targeted marketing strategy, coupled with
lower levels of churn on the back of improved customer service
• Gross margins declined which reflected the notable increase in renewable energy certificate
costs and the surge in gas cost in the 4Q16 that was not hedged due to the small load and
relatively high hedge cost
16
(10.0)
-
10.0
20.0
30.0
40.0
50.0
60.0
FY15 Revenue FY16 Revenue FY15 EBITDA FY16 EBITDA
AU$m
Source: TPC Consolidated Ltd 2016 Annual Report
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GROWTH AND OUTLOOK
Section 3
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Section 3: Growth and Outlook
Growth Opportunities
1 2 3 Organic growth and
expansion
• Increased marketing initiatives to
expand presence and grow in all
markets
• Increase in headcount to support the
business
Increase revenue
through cross-sell
• Adopting a dual fuel strategy, the
Company’s focus on cross-selling
electricity, gas, insurance and mobile
to the existing customer base is likely
to continue to boost revenues
Inorganic growth
• TPC is exploring inorganic growth
opportunities to accelerate its
expansion
• Appointed advisors to assist with
possible M&A activity
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Section 3: Growth and Outlook
Organic Outlook
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In FY17, TPC is expected to generate organic revenues of approximately $60m and
EBITDA of $2.0m – $3.0m
FY 2014 FY 2015 FY 2016 FY 2017
Revenue $13.1m $24.6m $47.6m ~$60m
Gross Profit $3.8m $5.1m $7.7m ~$13m
EBITDA ($1.6m) ($4.6m) ($3.0m) ~$2.0m-$3.0m
Profit before Tax ($8.2m) ($4.9m) ($3.3m) ~$1.5m-$2.5m
Margin
EBITDA % (12.0%) (18.6%) (6.3%) 3.3% - 5.0%
Profit before Tax % (63.9%) (19.8%) (6.9%) 2.5% - 4.2%
TPC Consolidated
The company intends to re-invest its profits to support the working capital required for the aggressive growth of the business for the short to
medium term. Subject to working capital requirements, the company will consider paying dividends when appropriate. The above outlook is
based on the latest management estimates and assumes there are no material changes in the operating and regulatory environments.
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Section 3: Growth and Outlook
ASX Listed Comparable Companies
20
TPC is significantly undervalued when compared to ASX listed peer companies
ASX Listed Energy Company Peers
Company
name
ASX
Code
Price
($) 1
Mkt Cap
($m) 1
Enterprise
Value 1
FY16
Revenue
($m)
FY16
EBITDA
($m)
FY16
Net income
($m)
FY17
Revenue
($m)2
FY17
EBITDA
($m)2
FY17
Net income
($m)2
Forward
EV /
EBITDA3
Forward
P / E ratio3
ERM Power
Ltd EPW 1.085 273 302 2,763 81 19 3,408 66 11.6 4.6 23.6
AGL Energy
Ltd AGL 20.07 13,506 15,903 11,150 1,689 701 11,301 1,749 767 9.1 17.5
Origin
Energy Ltd ORG 5.68 9,967 18,872 11,923 1,696 365 12,358 2,299 499 8.2 19.1
Source: FactSet as at 18 November 2016
Notes: 1. Price, market cap and enterprise value based on closing share price on ASX on 18 November 2016 and data as reported by FactSet
2. ERM Power Ltd, AGL Energy Ltd and Origin Energy Ltd based on analysts estimates as reported by FactSet on 18 November 2016
3. Ratios based on current price, or current enterprise value and FY17 estimated EBITDA and Net Income (source from FactSet)
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Contact
Please direct
enquiries to:
Mr Charles Huang
CEO
TPC Consolidated Limited
Suite 802, Level 8
1 York Street
Sydney NSW 2000
Phone: 1300 731 574
Email: info@tpc.com.au
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OVERVIEW OF THE
AUSTRALIAN ENERGY
MARKET
Appendix
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Appendix: Overview of the Australian energy market
Supply of electricity
23
Generation Transmission Distribution Retailers
De
sc
rip
tio
n
Reg
ula
tory
fram
ew
ork
S
eg
me
nt
pla
ye
rs
• Electricity generation
sold through the
electricity market
• Electricity transported
along high voltage
transmission lines and
underground cables
• Distribution lines and
substations where
transformers reduce the
voltage
• Sell electricity to end-
users and manage
customer accounts and
billing
• AEMO is the market
and system operator
• AER – National
Electricity Rules
• AER – National
Electricity Rules
• Price deregulation in
most major states,
including: NSW, VIC
and SA
Segment currently served
by:
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Appendix: Overview of the Australian energy market
Industry overview
24
• Estimated overall Electricity Retailing Market in Australia is valued at
$51.5B, which is expected to grow 1.6% annually 2016 to 2021
• In NSW, there are 3.3 million electricity customers and 1.2 million gas
customers
• In VIC, there are 2.7 million electricity customers and 1.9 million gas
customers
• Competition continues to grow in the NSW & VIC retail electricity
market. CovaU entered the market in 2014
• The big three legacy retailers dominate with 94% retail electricity
market share
• New and second tier retailers are growing and market concentration
has been slowly decreasing, falling to second tier retailers
• State Governments are encouraging competition regularly through
initiatives like "The Power's in Your Hands" campaign
Market overview, SME segment and trends
Industry growth trends
• Fewer competitors focus on the SME category, despite SME customers
consumption being higher than residential customers
• Competition is less intense in the retail gas market of NSW, with six retail
brands competing, including CovaU
• By operating in both gas and electricity markets, players may win market
share by being able to become a single supplier for both energy services
• Dual energy services help to reduce churn
• Our view is that the we expect the benefits of deregulation to be realised
gradually
Pimary producers
11%
Utilities 12%
Business 23%
Households 24%
Manufacturers 27%
Others 3%
Major Market Segmentation (2015-16)
Source: 1. IBISWorld Industry Report D2640, Electricity Retailing in Australia (May 2016).
37.0 33.2 35.1
38.6 40.8 44.3
51.1 52.0 49.5 51.5 52.8 51.6 53.8 54.4 55.7
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Industry Revenue
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Appendix: Overview of the Australian energy market
Contesting the market
25
• New electricity retailers that have entered the
market include:
CovaU
BlueNRG
Powershop
Pooled Energy and
Next Business Energy
M2 Energy (Commander Power & Gas).
• Not all retailers service both residential and small
business customers.
• Not all retailers provide both electricity and gas
services.
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Appendix: Overview of the Australian energy market
Government licences
26
• In Australia, the energy markets in the most profitable
and largest markets have been deregulated and are
opened to competition
• To enter into these markets, potential retailers are
required to be licence holders in each State
‒ Australian Energy Regulator for NSW, QLD, SA,
TAS
‒ Essential Services Commission for VIC
• Additional certification from State Governments are
required for gas market entry
‒ For VIC, CovaU had to demonstrate its capability,
business experience, financial capacity and ability
to operate to Energy Safe Victoria before being
able to start retailing
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Appendix: Overview of the Australian energy market
Strong market positioning
27
• In NSW, 28 retailers are authorised by the
Australian Energy Regulator to provide
electricity to the residential and small business
market
• CovaU is one of only 7 in NSW authorised by
the Australian Energy Regulator to provide gas
• In Victoria, 28 retailers are authorised by the
Essential Services Commission to provide
electricity
• 11 in Victoria are authorised to provide both gas
and electricity
• Only 6 retailers, including CovaU, are authorised
for dual fuels in both NSW and VIC
Retailer Electricity Gas Electricity GasActewAGL
AGL
Alinta Energy
Blue NRG
Click Energy
CovaU
Cozero Energy Retail
Diamond Energy
EnergyAustralia
EnergyAustralia Yallourn
ERM
Infigen Energy Markets
Lumo Energy
M2 Energy
Macquarie Bank
Momentum Energy
Next Business Energy
Neighbourhood Energy
Online Power and Gas
Origin Energy
Pacific Hydro
People Energy
Pooled Energy
Powerdirect
Powershop
Progressive Green
QEnergy
Red Energy
Sanctuary Energy
Simply Energy
Stanwell Corporation
Sun Retail
Sumo Power
WINenergy
28 7 28 11
VictoriaNew South Wales
Source: 1. Australian Energy Regulator - Annual Report On The Performance of The Retail Energy Market 2014-15: Appendix 1: Customer profile of energy retailers.
2. Essential Services Commission - Energy Retailers Comparative Performance Report Customer Service 2014-15, May 2016: Table 2.1 Retailer Participation By
Fuel and Customer Segment.
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Appendix: Overview of the Australian energy market
Change in retailers’ market share VIC
28
• Victoria was the first market to
deregulate
• Expect NSW to follow market
trends
• The big four retailers dominate
market share
• Second tier retailers have
increased market share YoY
since 2012
Source: 1. Essential Services Commission - Energy Retailers Comparative Performance Report Customer Service 2014-15, May 2016: Figure 1 Retailer Market Share By
Fuel and Customer Type 2012-13 to 2014-15.
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Disclaimer
The material in this presentation has been prepared by TPC Consolidated Ltd (“TPC”) ABN 99 073 079 268 and is
general background information about TPC’s activities current as at the date of this presentation. The information is
given in summary form and does not purport to be complete.
This presentation may contain forward looking statements including statements regarding our intent, belief or
current expectation with respect to TPC’s businesses and operations, market conditions, results of operation and
financial condition, and future plans. In particular, you are cautioned not to place undue reliance on any forward
looking statements regarding our belief, intent or expectations with respect to TPC’s business, market conditions
and / or results of operations, as although due care has been used in the preparation of such statements, actual
results may vary in a material manner. TPC does not undertake any obligation to publicly release any revisions to
these forward looking statements to reflect events or circumstances after the date of this presentation.
Information in this presentation, including forecast financial information, should not be considered as advice or a
recommendation to investors or potential investors in relation to holding, purchasing or selling securities.
Before acting on any information, you should consider the appropriateness of the information having regard to
these matters, any relevant offer document and in particular, you should seek independent financial advice.
Non-IFRS Financial Information
TPC’s results are reported under Australian equivalents to International Financial Reporting Standards (IFRS). This
presentation also includes certain non-IFRS measures including, “EBITDA”, “underlying” and “look through”. These
measures are used internally be management to assess the performance of our business and our associates,
make decisions on the allocation of resources and assess operational management. Non-IFRS measures have not
been subject to audit or review. All numbers listed as reported comply with IFRS.
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